5 ms·

Does anyone know why Tesla is laying off so agressively? While they are likely overvalued post-pandemic... their financial position appears solid even if the st

by lumost 4y ago

Does anyone know why Tesla is laying off so agressively? While they are likely overvalued post-pandemic... their financial position appears solid even if the stock fell by 50x. I doubt any cuts could yield the type of profitability that wall street expects at the current valuation.

MattRix 4y ago
These are not cuts because they are struggling, they are cuts for efficiency. From what I understand they will be hiring enough people over the next few months to make up for their recent cuts.
ivraatiems 4y ago
It's because Elon Musk has a "super bad feeling": https://www.wpr.org/elon-musk-has-super-bad-feeling-about-economy-and-wants-tesla-cut-jobs https://www.wpr.org/elon-musk-has-super-bad-feeling-about-ec... That's the reason.
UkrainianJew 4y ago
Tesla P/E is at 94, Ford is at 4, so they are overvalued by quite a lot. The interest rates will likely reach 3% by the end of the year, and may need to go all the way to 8% to have a meaningful effect on the inflation. Every measurable economic metric suggests we are rolling full speed into a recession. And driving your old car for another year or two instead of upgrading to that nice luxury EV is one of the first things many people would do. So, their sales will likely plummet. Taking on more debt will become quite expensive, and the share prices will very likely correct by a lot. They are doing everything well, if you ask me.
- DoesntMatter22 4y ago
  Comparing Tesla to Ford is just comical. Tesla has a completely different technology they work on, and has a massive lead on Ford in EV's. You don't even know what you are saying about Tesla. Take on more debt? Why would they do that? They have 17 billion dollars in cash on hand, and paid off a lot of their pre existing debt. Even if they want to build a new gigafactory they don't need any more funding. They smartly sold more shares when the stock was insanely high and got a huge infusion.
  - hotpotamus 4y ago
    I don't really see why the comparison is comical. I need a box with wheels to get me from place to place like many Americans. Right now I've got a manual 2016 Chevy Cruze because I got a really good deal on it. I like the idea of my next car being electric so I'd probably be cross shopping a Bolt with a Model 3, but that idea made a lot more sense when the 3 was supposed to be $30K. Now the Bolt is going to be something like $27K and the 3 is what - close to $60K? I'm sure the model 3 is faster, but I drive in traffic so I don't get to go fast anyway. If Ford makes an electric Fiesta for a reasonable price I'll throw that in the mix. I'll gladly look at the Asian makers too if they come up with something - the Ioniq looks nice by all accounts.
    - DoesntMatter22 4y ago
      Sure, but will Ford make money off of it? That's to be seen. Tesla is the Apple of car makers and they've grown aggressively. Ford is only going to be replacing existing cars with new electric cars, which are probably not going to be very profitable in the short term. Meanwhile, Tesla is very profitable over the last few years and is very profitable on a per car basis. Not to mention the other tech that they are working on. P/E is always going to be relative to growth. tons of companies have infinite P/E and are hemorrhaging money. Tesla is not.
      - hotpotamus 4y ago
        Well if I buy a Ford and not a Tesla, then Ford will presumably make some money from me and Tesla won't make any. I'll give it to Tesla (and Musk really) that they really mainstreamed the electric car by making it a luxury/halo type product, but it looks to me like they're losing a lot of their first-mover advantages now and they'll probably be losing some margin. Also their CEO went kinda nuts which didn't help the brand so much, but it seems like someone got him off twitter, so that might help too. Hopefully Tesla can stay competitive and keep pushing the tech forward, but I think they've got some tough times ahead.
        DoesntMatter22 4y ago
- deleted 4y ago
  [deleted]
- cableshaft 4y ago
  The Fed can't easily raise rates all the way up to 8%. The higher rates affect the government just as much as you buying a new home or taking out a loan, and the government has a shitload of debt it has to keep refinancing. "But with help from the Treasury and from Social Security’s actuaries, I’ve come up with a reasonable estimate of that added interest cost. By my math, the Fed’s higher rates will increase the federal government’s interest costs by about $128 billion a year." That may not sound like much, given the trillions of dollars of investment wealth that have been vaporized by the Fed’s higher rates. Or given the $1.4 trillion deficit President Biden’s proposed budget projects for this year. But $128 billion is in the vicinity of the $133 billion total that the Biden budget is seeking for the Energy, Homeland Security and Agriculture Departments. Or is just $2 billion below the total that the Biden budget proposes to spend for the Interior Department, the Labor Department, the Commerce Department, the Treasury, the Environmental Protection Agency, the National Aeronautics and Space Administration, the National Science Foundation, the Social Security Administration and the Corps of Engineers. Combined."[1] "Already, the federal government spends $330 billion per year, or $2,207 per taxpayer, on interest payments – more than on food stamps and disability insurance combined. And two-thirds of our debt is slated to roll over in the next five years, likely into higher interest rate bonds. For every 1 percentage point increase in interest rates above projections, deficits grow by $2 trillion over a decade; that’s on top of the nearly $13 trillion in projected borrowing over the next decade."[2] [1]: https://www.washingtonpost.com/business/2022/06/27/fed-rate-rises-interest-national-debt/ https://www.washingtonpost.com/business/2022/06/27/fed-rate-... [2]: https://www.crfb.org/press-releases/feds-interest-rate-hike-underlines-importance-reducing-debt https://www.crfb.org/press-releases/feds-interest-rate-hike-...
  - dannyw 4y ago
    The numbers you use to benchmark are arbitrary. The annual budget is about $6 trillion. They certainly can eat another $128B or even $500B. After all, when inflation is higher than interest rates, the real yield is negative.
  - naveen99 4y ago
    The fed can do qe just as easily at 8% interest rates. They just feed the interest right back to the treasury.
- geoduck14 4y ago
  If inflation is going up, like you suggest, now is the time to buy the stuff that you want - before the price goes up
  - 331c8c71 4y ago
    For many recession means a higher risk of being laid off.
vannevar 4y ago
These are not the kind of cuts you make because you have a bad feeling. These are the kinds of cuts you make because you're seeing orders fall off a cliff. I suspect that in particular Tesla is seeing erosion in their Cybertruck pre-orders given that Ford and Rivian have beaten them to market and both those products are drawing rave reviews.
- DoesntMatter22 4y ago
  That doesn't even make any sense. Tesla doesn't even sell any CyberTrucks right now, so even if they lost all their pre orders it wouldn't affect revenue now. Ford and Rivian aren't even making vehicles in any sort of volume to be even a minor rival. And why do you think that orders are falling off of a cliff exactly? Tesla has grown incredibly fast, they have 100k employees, they have a terrific balance sheet and are at no risk of bankruptcy. For the last 10 years people seem to always lay out this awful scenario for Tesla, meanwhile they are growing in sales incredibly quickly, literally the quickest ever.
  - vannevar 4y ago
    Tesla has grown incredibly fast, they have 100k employees, they have a terrific balance sheet and are at no risk of bankruptcy. Tesla has grown incredibly quick, all while essentially having the electric car market to themselves. That is no longer true---their market share will inevitably shrink, because it has nowhere to go but down. If the overall market growth slows---say, because of inflation and a recession---then this could be a problem for a company that has been staffing for breakneck growth and now sees that growth flattening. I'm not saying Tesla is going bankrupt, but I do believe that having two major competitors beat it to market in a strategic segment like trucks is a problem for Tesla, they are seeing that problem play out in projected sales, and they are trimming the payroll to rightsize for more challenging conditions.
- saurik 4y ago
  FWIW, I get the impression that their primary problem right now is production capacity / supply, not pre-orders / demand: they are pretty constantly increasing the price, are moving the delivery date of existing orders forward, have occasionally hinted they might should simply stop taking orders at all as they are so far behind, and supposedly have tons of cars sitting around at Tesla locations waiting for one or two more parts to come in before they can be handed to customers.
pengaru 4y ago
Five days ago Tesla's CEO was quoted as recently stating: "Both Berlin and Austin factories are gigantic money furnaces right now. OK? It should be like a giant roaring sound which is the sound of money on fire," Musk said in the interview with Tesla Owners Silicon Valley, which was recorded on May 30 and published Wednesday. "Berlin and Austin are losing billions of dollars right now because there's a ton of expense and hardly any output. Getting Berlin and Austin functional and getting Shanghai back in the saddle fully are overwhelmingly our concerns. Everything else is a very small thing basically." Musk said the Texas factory is "losing insane money" at the moment because of troubles ramping up production of cars with the so-called 4680 battery, Tesla's latest technology. Meanwhile, the tools to make cars for the traditional 2170 batteries are "stuck in a port in China." Since the interview, Musk has announced plans to reduce Tesla's salaried workforce by 10% in the next three months. But the company plans to increase the number of hourly employees. Tesla's layoffs would affect around 3.5% of its overall workforce, Musk said this week. Source: https://www.cnbc.com/2022/06/23/musk-says-tesla-berlin-and-austin-factories-losing-billions-of-dollars.html https://www.cnbc.com/2022/06/23/musk-says-tesla-berlin-and-a...

by lumost 4y ago

MattRix 4y ago

These are not cuts because they are struggling, they are cuts for efficiency. From what I understand they will be hiring enough people over the next few months to make up for their recent cuts.

ivraatiems 4y ago

It's because Elon Musk has a "super bad feeling": https://www.wpr.org/elon-musk-has-super-bad-feeling-about-economy-and-wants-tesla-cut-jobs https://www.wpr.org/elon-musk-has-super-bad-feeling-about-ec... That's the reason.

UkrainianJew 4y ago

Tesla P/E is at 94, Ford is at 4, so they are overvalued by quite a lot. The interest rates will likely reach 3% by the end of the year, and may need to go all the way to 8% to have a meaningful effect on the inflation. Every measurable economic metric suggests we are rolling full speed into a recession. And driving your old car for another year or two instead of upgrading to that nice luxury EV is one of the first things many people would do. So, their sales will likely plummet. Taking on more debt will become quite expensive, and the share prices will very likely correct by a lot. They are doing everything well, if you ask me.

DoesntMatter22 4y ago
Comparing Tesla to Ford is just comical. Tesla has a completely different technology they work on, and has a massive lead on Ford in EV's. You don't even know what you are saying about Tesla. Take on more debt? Why would they do that? They have 17 billion dollars in cash on hand, and paid off a lot of their pre existing debt. Even if they want to build a new gigafactory they don't need any more funding. They smartly sold more shares when the stock was insanely high and got a huge infusion.
- hotpotamus 4y ago
  I don't really see why the comparison is comical. I need a box with wheels to get me from place to place like many Americans. Right now I've got a manual 2016 Chevy Cruze because I got a really good deal on it. I like the idea of my next car being electric so I'd probably be cross shopping a Bolt with a Model 3, but that idea made a lot more sense when the 3 was supposed to be $30K. Now the Bolt is going to be something like $27K and the 3 is what - close to $60K? I'm sure the model 3 is faster, but I drive in traffic so I don't get to go fast anyway. If Ford makes an electric Fiesta for a reasonable price I'll throw that in the mix. I'll gladly look at the Asian makers too if they come up with something - the Ioniq looks nice by all accounts.
  - DoesntMatter22 4y ago
    Sure, but will Ford make money off of it? That's to be seen. Tesla is the Apple of car makers and they've grown aggressively. Ford is only going to be replacing existing cars with new electric cars, which are probably not going to be very profitable in the short term. Meanwhile, Tesla is very profitable over the last few years and is very profitable on a per car basis. Not to mention the other tech that they are working on. P/E is always going to be relative to growth. tons of companies have infinite P/E and are hemorrhaging money. Tesla is not.
    - hotpotamus 4y ago
      Well if I buy a Ford and not a Tesla, then Ford will presumably make some money from me and Tesla won't make any. I'll give it to Tesla (and Musk really) that they really mainstreamed the electric car by making it a luxury/halo type product, but it looks to me like they're losing a lot of their first-mover advantages now and they'll probably be losing some margin. Also their CEO went kinda nuts which didn't help the brand so much, but it seems like someone got him off twitter, so that might help too. Hopefully Tesla can stay competitive and keep pushing the tech forward, but I think they've got some tough times ahead.
      - DoesntMatter22 4y ago
deleted 4y ago
[deleted]
cableshaft 4y ago
The Fed can't easily raise rates all the way up to 8%. The higher rates affect the government just as much as you buying a new home or taking out a loan, and the government has a shitload of debt it has to keep refinancing. "But with help from the Treasury and from Social Security’s actuaries, I’ve come up with a reasonable estimate of that added interest cost. By my math, the Fed’s higher rates will increase the federal government’s interest costs by about $128 billion a year." That may not sound like much, given the trillions of dollars of investment wealth that have been vaporized by the Fed’s higher rates. Or given the $1.4 trillion deficit President Biden’s proposed budget projects for this year. But $128 billion is in the vicinity of the $133 billion total that the Biden budget is seeking for the Energy, Homeland Security and Agriculture Departments. Or is just $2 billion below the total that the Biden budget proposes to spend for the Interior Department, the Labor Department, the Commerce Department, the Treasury, the Environmental Protection Agency, the National Aeronautics and Space Administration, the National Science Foundation, the Social Security Administration and the Corps of Engineers. Combined."[1] "Already, the federal government spends $330 billion per year, or $2,207 per taxpayer, on interest payments – more than on food stamps and disability insurance combined. And two-thirds of our debt is slated to roll over in the next five years, likely into higher interest rate bonds. For every 1 percentage point increase in interest rates above projections, deficits grow by $2 trillion over a decade; that’s on top of the nearly $13 trillion in projected borrowing over the next decade."[2] [1]: https://www.washingtonpost.com/business/2022/06/27/fed-rate-rises-interest-national-debt/ https://www.washingtonpost.com/business/2022/06/27/fed-rate-... [2]: https://www.crfb.org/press-releases/feds-interest-rate-hike-underlines-importance-reducing-debt https://www.crfb.org/press-releases/feds-interest-rate-hike-...
- dannyw 4y ago
  The numbers you use to benchmark are arbitrary. The annual budget is about $6 trillion. They certainly can eat another $128B or even $500B. After all, when inflation is higher than interest rates, the real yield is negative.
- naveen99 4y ago
  The fed can do qe just as easily at 8% interest rates. They just feed the interest right back to the treasury.
geoduck14 4y ago
If inflation is going up, like you suggest, now is the time to buy the stuff that you want - before the price goes up
- 331c8c71 4y ago
  For many recession means a higher risk of being laid off.

vannevar 4y ago

These are not the kind of cuts you make because you have a bad feeling. These are the kinds of cuts you make because you're seeing orders fall off a cliff. I suspect that in particular Tesla is seeing erosion in their Cybertruck pre-orders given that Ford and Rivian have beaten them to market and both those products are drawing rave reviews.

DoesntMatter22 4y ago
That doesn't even make any sense. Tesla doesn't even sell any CyberTrucks right now, so even if they lost all their pre orders it wouldn't affect revenue now. Ford and Rivian aren't even making vehicles in any sort of volume to be even a minor rival. And why do you think that orders are falling off of a cliff exactly? Tesla has grown incredibly fast, they have 100k employees, they have a terrific balance sheet and are at no risk of bankruptcy. For the last 10 years people seem to always lay out this awful scenario for Tesla, meanwhile they are growing in sales incredibly quickly, literally the quickest ever.
- vannevar 4y ago
  Tesla has grown incredibly fast, they have 100k employees, they have a terrific balance sheet and are at no risk of bankruptcy. Tesla has grown incredibly quick, all while essentially having the electric car market to themselves. That is no longer true---their market share will inevitably shrink, because it has nowhere to go but down. If the overall market growth slows---say, because of inflation and a recession---then this could be a problem for a company that has been staffing for breakneck growth and now sees that growth flattening. I'm not saying Tesla is going bankrupt, but I do believe that having two major competitors beat it to market in a strategic segment like trucks is a problem for Tesla, they are seeing that problem play out in projected sales, and they are trimming the payroll to rightsize for more challenging conditions.
saurik 4y ago
FWIW, I get the impression that their primary problem right now is production capacity / supply, not pre-orders / demand: they are pretty constantly increasing the price, are moving the delivery date of existing orders forward, have occasionally hinted they might should simply stop taking orders at all as they are so far behind, and supposedly have tons of cars sitting around at Tesla locations waiting for one or two more parts to come in before they can be handed to customers.

pengaru 4y ago

Five days ago Tesla's CEO was quoted as recently stating: "Both Berlin and Austin factories are gigantic money furnaces right now. OK? It should be like a giant roaring sound which is the sound of money on fire," Musk said in the interview with Tesla Owners Silicon Valley, which was recorded on May 30 and published Wednesday. "Berlin and Austin are losing billions of dollars right now because there's a ton of expense and hardly any output. Getting Berlin and Austin functional and getting Shanghai back in the saddle fully are overwhelmingly our concerns. Everything else is a very small thing basically." Musk said the Texas factory is "losing insane money" at the moment because of troubles ramping up production of cars with the so-called 4680 battery, Tesla's latest technology. Meanwhile, the tools to make cars for the traditional 2170 batteries are "stuck in a port in China." Since the interview, Musk has announced plans to reduce Tesla's salaried workforce by 10% in the next three months. But the company plans to increase the number of hourly employees. Tesla's layoffs would affect around 3.5% of its overall workforce, Musk said this week. Source: https://www.cnbc.com/2022/06/23/musk-says-tesla-berlin-and-austin-factories-losing-billions-of-dollars.html https://www.cnbc.com/2022/06/23/musk-says-tesla-berlin-and-a...